Exam 3: Quantitative Demand Analysis

The demand for company X's product is given by Q_x = 12 - 3P_x + 4P_y. Suppose good X sells for $3.00 per unit and good Y sells for $1.50 per unit. a. Calculate the cross-price elasticity of demand between goods X and Y at the given prices. b. Are goods X and Y substitutes or complements? c. What is the own price elasticity of demand at these prices? d. How would your answers to parts a and c change if the price of X dropped to $2.50 per unit?

If the absolute value of the own price elasticity of demand is greater than 1, then demand is said to be:

When the price of corn was "low," consumers in the United States spent a total of $8 billion annually on its consumption. When the price halved, consumer expenditures actually DECREASED to $6 billion annually. This indicates that:

The demand for video recorders has been estimated to be Q_v = 134 - 1.07P_f + 46P_m - 2.1P_v - 5I, where Q_v is the quantity of video recorders, P_f denotes the price of video recorder film, P_m is the price of attending a movie, P_v is the price of video recorders, and I is income. Based on the estimated demand equation we can conclude:

The cross-price elasticity of demand between goods X and Y is -3.5. If the price of X decreases by 7 percent, the quantity demanded of Y will:

A firm derives revenue from two sources: goods X and Y. Annual revenues from good X and Y are $10,000 and $20,000, respectively. If the price elasticity of demand for good X is -2.0 and the cross-price elasticity of demand between Y and X is 1.5, then a 4 percent increase in the price of X will:

We would expect the own price elasticity of demand for food to be:

Non-fed ground beef is an inferior good. In economic booms, grocery managers should:

The demand for which of the following commodities is likely to be most inelastic?

A study has estimated the effect of changes in interest rates and consumer confidence on the demand for money to be: ln M = 14.666 + .021 ln C - 0.036 ln r, where M denotes real money balances, C is an index of consumer confidence, and r is the interest rate paid on bank deposits. Based on this study, a 5 percent increase in interest rates will cause the demand for money to: